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Forest Laboratories Inc (NYSE:FRX)
Beneish M-Score
-3.04 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Forest Laboratories Inc has a M-score of -3.04 suggests that the company is not a manipulator.

FRX' s 10-Year Beneish M-Score Range
Min: -4.96   Max: -1.85
Current: -3.04

-4.96
-1.85

During the past 13 years, the highest Beneish M-Score of Forest Laboratories Inc was -1.85. The lowest was -4.96. And the median was -2.43.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Forest Laboratories Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.0263+0.528 * 0.9991+0.404 * 1.1093+0.892 * 1.1758+0.115 * 0.6172
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0841+4.679 * -0.0244-0.327 * 2.8703
=-3.04

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $577 Mil.
Revenue was 1092.278 + 878.396 + 855.255 + 832.935 = $3,659 Mil.
Gross Profit was 842.991 + 696.126 + 691.537 + 667.568 = $2,898 Mil.
Total Current Assets was $4,124 Mil.
Total Assets was $12,018 Mil.
Property, Plant and Equipment(Net PPE) was $372 Mil.
Depreciation, Depletion and Amortization(DDA) was $311 Mil.
Selling, General & Admin. Expense(SGA) was $1,986 Mil.
Total Current Liabilities was $1,511 Mil.
Long-Term Debt was $3,000 Mil.
Net Income was 54.084 + 17.961 + 69.987 + 23.278 = $165 Mil.
Non Operating Income was 0 + 0 + -7.801 + -4.164 = $-12 Mil.
Cash Flow from Operations was 140.031 + 202.934 + 156.134 + -28.196 = $471 Mil.
Accounts Receivable was $478 Mil.
Revenue was 813.826 + 716.281 + 760.637 + 821.127 = $3,112 Mil.
Gross Profit was 636 + 562.97 + 610.914 + 652.904 = $2,463 Mil.
Total Current Assets was $2,948 Mil.
Total Assets was $7,630 Mil.
Property, Plant and Equipment(Net PPE) was $377 Mil.
Depreciation, Depletion and Amortization(DDA) was $147 Mil.
Selling, General & Admin. Expense(SGA) was $1,558 Mil.
Total Current Liabilities was $998 Mil.
Long-Term Debt was $0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(576.854 / 3658.864) / (478.032 / 3111.871)
=0.15765932 / 0.15361562
=1.0263

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(696.126 / 3111.871) / (842.991 / 3658.864)
=0.79141712 / 0.79210979
=0.9991

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (4123.712 + 371.815) / 12017.531) / (1 - (2947.786 + 376.96) / 7629.582)
=0.62591925 / 0.5642296
=1.1093

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=3658.864 / 3111.871
=1.1758

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(147.269 / (147.269 + 376.96)) / (310.652 / (310.652 + 371.815))
=0.28092494 / 0.45518977
=0.6172

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(1986.229 / 3658.864) / (1558.306 / 3111.871)
=0.54285401 / 0.50076176
=1.0841

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((3000 + 1510.669) / 12017.531) / ((0 + 997.691) / 7629.582)
=0.37534074 / 0.13076614
=2.8703

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(165.31 - -11.965 - 470.903) / 12017.531
=-0.0244

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Forest Laboratories Inc has a M-score of -3.04 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Forest Laboratories Inc Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
DSRI 0.94451.20990.89861.04560.98550.99011.0680.84911.50191.0238
GMI 0.98531.00280.9960.98980.99951.01570.9970.99940.99010.9985
AQI 1.02071.00431.38281.05720.81441.03590.9142.43941.19221.1093
SGI 1.18950.93761.16181.11461.02251.06881.05411.03760.67471.1787
DEPI 1.23130.68120.90761.05370.95211.03321.13570.73510.90020.6172
SGAI 0.92711.10710.87310.99021.24850.80231.05211.06771.4871.0814
LVGI 0.97180.88691.27310.78571.16591.00020.86070.88651.08882.8703
TATA -0.00940.0469-0.1189-0.0258-0.0438-0.0485-0.0103-0.0591-0.0219-0.0254
M-score -2.36-2.14-2.91-2.36-2.86-2.59-2.40-2.29-2.46-3.04

Forest Laboratories Inc Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.08780.84910.78990.87270.90541.49321.61011.22840.92221.0263
GMI 0.99430.99940.99430.98560.9840.98860.99050.9970.99810.9991
AQI 2.29782.43941.11561.17211.32811.19221.17551.08940.85321.1093
SGI 1.07631.03760.94460.83890.71840.67860.73410.83661.00791.1758
DEPI 0.69310.73510.77570.86810.89440.90020.88670.85690.87610.6172
SGAI 1.01281.06771.27311.34681.48671.47841.39881.26391.04431.0841
LVGI 0.92220.88650.75650.79810.94681.08881.15671.12491.95662.8703
TATA -0.0228-0.0591-0.0486-0.0394-0.054-0.0196-0.0081-0.0193-0.0229-0.0244
M-score -1.93-2.29-2.90-2.87-3.03-2.46-2.26-2.57-3.05-3.04
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